The Pima County delinquent tax lien sale has been scheduled for Feb. 24,25 & 26, 2010. The county treasurer’s web site has some information about bidding at the sale and purchasing liens. Hogan School has two classes coming up on January 25th and February 17th.

FHA MIP has increased the up-front from 1.75% to 2.25 %. In addition, there are other important changes you should be aware of.

Read all the news at HUD’s web site.

The Federal Government has extended and expanded the tax credit for home buyers. Here’s the scoop! For first time homebuyers (people who have not owned a home for at least three years) the tax credit is $8,000. A contract to buy must be entered into by April 30, 2010 and close on the home by June 30.

People who currently own a home and want to buy a replacement home may qualify for a $6,500 tax credit. They must have lived in that home for five consecutive years within the last eight years.

A tax credit is a dollar for dollar credit against taxes owed. So, an $8,000 tax credit reduces tax by $8,000. Check with your tax preparer but even if you don’t have $8,000 in tax to pay, the government may write you a check. Check out the video from IRS. Combine the tax credit with low home prices and low interest rates and now is a great time to become a homeowner. Act now! Don’t wait!

Source: Ludwig, Klewer & Co. PLLC

Mortgage points paid on the purchase of a main residence are fully deductible whether paid in cash or financed over the life of the loan, so long as the cash down payment at least equals the cost of the points.

Not all points are deductible up front. You can deduct those on a refinanced loan evenly over the term of the loan. Refinancing the loan for a second time triggers the deduction of the remaining balance of the points from the last refinancing. If you sell a residence while amortizing the points, any points not yet deducted are written off in full. If you use some of the refinancing proceeds to fix up your principal home, a portion of the points is deductible up front. State and local transfer taxes on a home purchase are not deductible but can be added to the tax basis and reduce the realized gain when you sell the house.

Pulling out cash in a home refinancing can create AMT problems, because if the mortgage balance increases when you’re refinancing a primary residence or a second home, interest on the excess portion is added back to income under the AMF (Exception: when the extra proceeds are used to improve a first or second home.)

A full deduction for interest on up to $1 million of property recorded Home Acquisition Debt (to buy, build, or substantially improve a main or second residence) remains a major tax shelter. (If the mortgage dates from before Oct. 13, 1987, all the interest is deductible.)

Interest on a Home Equity Loan up to $100,000 secured by a residence is fully deductible, with deductibility of amounts above that depending on the use of the proceeds. If you use your house as security on a loan from your 401(k) or 403(b) annuity, the interest is deductible as mortgage interest even if the total of loans exceeds $100,000 and you are a key executive. Since only home-acquisition debt is deductible under the AMT, high home-equity debt might trigger the AMT.

KEEP IN MIND        

• If you tapped IRAs for a failed first-home purchase you have 120 days to roll the money back to an IRA without tax or penalty – twice the time allowed for a standard IRA distribution. It’s treated as a rollover, and only one is allowed for each IRA per year.
• You can tap an IRA (penalty-free not tax-free) for up to $10,000 to buy a first home. You can tape a 401(k) only by borrowing from it.
• The property tax on your home depends on the valuation. Big swings in real estate prices may put valuations out of sync with actual prices.
• If your estate is worth more than $3.5 million you might shrink its value below the taxation threshold by encumbering your home with a “reverse mortgage”, trading equity for current income that is not taxable and doesn’t affect Social Security benefits. If the lender is your child, you get regular payments of cash (or a lump sum) while the child gets the tax benefit of depreciation on the real estate. But depreciated real estate will not fully quality for the lowest tax on gains.
• The tax code allows equity-sharing in which an investor (such as a parent) makes a down payment on a house while the resident (e.g., child) pays the mortgage, taxes and maintenance. The investor could get depreciation deductions, plus part ownership of a residence that may appreciate. The resident might get deductions for part of the mortgage interest and property taxes and eventual 100% ownership.
• The time limits associated with tax-free exchanges of real estate are strictly enforced.

On November 6, 2009 President Obama signed legislation which contains two provisions which are important for the real estate industry.

Extension of New Homeowners Credit of $8,000   Individuals who have not owned a principal residence in the last three years now have until April 30, 2010 to purchase a residence in order to get a refundable credit of $8,000.  Previously this opportunity was to sunset on November 30, 2009.  If a binding contract is in place on April 30, 2010 the credit can still be obtained if escrow closes by June 30, 2010.

As before the new home must be occupied as a principal residence for at least three years otherwise the credit must be repaid.

 New Longtime Homeowners Credit of $6,500

Existing homeowners also can get a credit if they purchase a new principal residence by April 30, 2010 (June 30 for binding contracts on April 30, 2010). The $6,500 refundable credit is only available to individuals who have owned a principal residence for at least five out of the eight years before the purchase date of the new home.

There is no requirement that the old residence be sold.  The credit is still available if the old home becomes a second home, if it is converted to a rental or if the homeowner decides to wait until prices come back before selling.

In addition to taking the credit of $6,500 for a new home, a homeowner can still exclude the gain on sale of the old home up to $500,000 for married couples, $250,000 for single individuals.

This creates an opportunity both for individuals who want to step up to a larger house as well as for the empty nesters who would like to downsize.

As before no credit is available for residences acquired by gift or inheritances or for homes purchased from immediate family members.  Taxpayers do not have to wait until they file their 2009 tax returns to get the credit.  For purchases in 2009 the credit may be claimed by filing an amended return for 2008.

Both credits are phased out for high income individuals with adjusted gross income over $225,000 if married and $125,000 if single.

As usual it is important that clients consult with their tax professionals to make sure that they will qualify for the credit.